Climate risk of supply chain and trade credit contract

Climate risk of supply chain, as an important form of climate risk, is directly related to the stability of the industrial chain. The existing literature has already paid attention to the economic and financial consequences of enterprises’ own climate risk, but has not paid attention to the potential impacts of external supply chain climate risk on enterprises as well, as the core component of supply chain finance, will the trade credit contract be affected by the climate risk of external supply chain? Using the data of Shanghai and Shenzhen A-share listed companies from 2013 to 2020, the results show that the higher the climate risk of supply chain is, the more favorable the trade credit contract can be obtained. After a series of robustness tests such as instrumental variable regression and entropy balance matching, the above positive effects are still significant. The mechanism test shows that firms tend to accept suppliers with high climate risk for financial constraints and short-term arbitrage, while the cross-sectional test shows that, the above effects will be more significant in the sample of enterprises with low credit availability, high cost transfer ability and poor external institutional environment. From the economic consequences test, although it can gain a certain trade credit advantage, however, excessive climate risk of supply chain will have a significant negative impact on the development of ESG, the level of green innovation and the total factor productivity of enterprises, which is not conducive to the high-quality development of enterprises. © 2023 Systems Engineering Society of China. All rights reserved.